Bitfinex's new gambit meant for alleviating its financial distress is almost too crypto. The popular Hong Kong-based exchange has been accused by the New York Attorney General of fraudulently covering up an $850 million loss. Now it appears to be planning—what else?—an initial coin offering aimed at raising up to $1 billion.
Mind you, Bitfinex isn't calling it an ICO. Instead it's jumping on the bandwagon of a buzzy new acronym: the "initial exchange offering," or IEO. Malta-based crypto exchange Binance got the IEO party started a couple of months ago with a platform called Launchpad, which requires that investors use Binance's native token, called BNB. The setup gives Binance several new sources of revenue, including whatever the startups pay for admission, trading fees associated with the sale, and perhaps even a jump in the BNB token's value. Bitfinex now appears to be planning to launch is its own IEO, with a new token called LEO.
Don't let all the acronyms confuse you. We are still talking about token sales aimed at retail investors. Unlike similarly buzzy security token offerings (STOs), IEOs are not designed to comply with securities rules. In many ways they are ICOs, except run by exchanges. The exchanges do the marketing and run identity checks on investors, and IEOs generally exclude investors from the US and other countries where securities laws could cause problems.
Is the IEO model sustainable, as long as the exchanges who run them stay headquartered in crypto-friendly jurisdictions like Hong Kong and Malta, and market only to investors of select countries? As long as the trend continues, it seems bound to keep raising complicated legal questions on a global scale. For instance, are exchange coins like BNB and LEO securities themselves? Should there be a set of global regulations that govern token sales? If so, who should enforce them?
In other words, Bitfinex, which already finds itself in complicated and uncertain legal waters, is doubling down on both the complication and uncertainty. That's so crypto it's almost too crypto.
Drip … drip … drip comes the news about Facebook's blockchain project. Whatever crypto thing(s) the social network is building behind the scenes got slightly clearer last week, thanks to a report from the Wall Street Journal that the company is recruiting "dozens of financial firms and online merchants" as part of a project to build a "cryptocurrency-based payment system." That builds on a story in the New York Times in February that said the project was far enough along that Facebook had held talks with cryptocurrency exchanges about selling a Facebook coin whose value would be pegged to a "basket of different foreign currencies."
Two smaller-but-still-interesting items have been revealed in the wake of the WSJ story. CoinDesk reports that Christian Catalini, an MIT professor who has emerged as a prominent "crypto economist," is on leave and is contributing to Facebook's blockchain endeavors. And the The Block reports that the company has acquired a trademark for "Libra," which is also the internal code name for the crypto project.
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- Warren Buffet says Bitcoin is a "gambling device" that "hasn't produced anything." (CoinDesk)
